Banking system needs 'major overhaul', says reportCross-party Commission recommends banking reform

13 June 2010

Banking Commission David Davis

The Future of Banking Commission has today delivered its findings to the Government, calling for profound reform of the UK banking system.

The Commission’s recommendations aim to put ordinary people and society at the heart of a reformed banking system. They include reforms to help ensure the safety of depositors’ money, the introduction of new rules to make banks responsible for meeting consumers’ needs and the creation of a healthy, professional and ethical culture in financial services.

Future of Banking Commission participants

The cross-party Commission, chaired by former shadow Home Secretary Rt Hon David Davis MP and developed by Which?, gathered evidence from regulators, consumer groups and business leaders. Governor of the Bank of England Mervyn King, Former Treasury Secretary Lord Myners and chairman of the Financial Services Authority Lord Turner all gave evidence to the Commission, as did executives from the UK’s largest banking groups.

However, what set the Future of Banking Commission apart from past banking inquiries was the variety of evidence it took from consumers. People were able to submit information and share their experiences online as well as participate in the Which? Big Banking Debate - an event attended by more than 300 members of the public in London in February. These contributions have helped shape the Commission’s final report.

You can download the Future of Banking Commission report from the dedicated Which? website and share it with friends, relatives and colleagues using our forward to a friend function.

Banking regulations and reform 

Other recommendations by the Future of Banking Commission include:

  • ‘Living wills’. These would detail how the collapse of a bank would be managed, and how customers would be treated;
  • Improvements to depositor protection, including a new class of ‘safe haven’ accounts where money would only be invested in safe assets;
  • Restructuring banks so that, if they were to fail, this would not cause catastrophic damage to their customers or to the economy;
  • The separation of investment advice from the execution of trading;
  • That banks’ boards, not regulators, should take primary responsibility for the management and stability of their banks;
  • Regulations to increase competition among banks;
  • That senior executives should be rewarded for long-term business performance and shareholder returns;
  • A step change in transparency, achieved by a combination of reform in the accounting rules for banks and credit rating agencies;
  • A programme of cultural change which would see, amongst other things, banks ceasing to pay commission to frontline staff.

The Commission’s recommendations will be delivered to 11 Downing Street, with the hope that they shape the Government’s policy on financial reform.

Future of Banking Commission findings

Rt Hon David Davis MP, chair of the Future of Banking Commission, said: ‘Banks provide a vital service to the economy, without which no modern nation can survive or prosper. Nevertheless, fatal flaws in the structure, regulation and behaviour of the banks almost crippled the world economy in the last few years. The United Kingdom cannot afford to face such a crisis again.

‘The Future of Banking Commission has considered in detail the root causes of these failures and proposes a range of reforms designed to improve the service banks give their customers. We have made recommendations to minimise the conflicts of interest inherent in banking, and to limit the liability of the taxpayer and thereby reduce the risk to the economy. We also propose a structure and regulatory regime designed to entrench a stable and competitive banking sector for the long term.’

Which? chief executive Peter Vicary-Smith commented: ‘Banks can’t be allowed to go back to business as usual. We must never again be faced with a situation where consumers pay the price for the failures of the banking system.

‘A major change in the structure, operation and culture of our banks is needed if we are to rebuild the trust in our banking system that was so badly damaged by the financial crisis.’

For more information on the Future of Banking Commission and to share your views on its findings, log on to

pound coins

Which? Money when you need it

You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.

Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.

Or for money-saving tips, and news of how what's going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast

For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.